The One Page Financial Plan Synopsis Part 2: Awareness

In late March Balentine’s Director of Communications had the privilege of speaking with Carl Richards about his latest book The One Page Financial Plan. Carl Richards is an author and artist, perhaps best known for his napkin sketches. Balentine has long been a fan of Carl Richards’ message on overcoming psychological factors which oftentimes cause a disparity between returns earned by actual investors versus market benchmarks.

The One Page Financial Plan then is a logical next step for Richards, as it effectively counsels readers on how to bridge that so-called “behavior gap”. Over the course of five Market Notebook entries, we explain what our top five takeaways were from The One Page Financial Plan and our subsequent conversation with Richards. 

1. Values should dictate how you spend your money

2. Awareness is key

The second key takeaway is that awareness is key. As humans, we like to avoid pain. A great example is budgeting. Budgeting to many is a scary word: something that, if applied “will hold us from buying what we want” and that make us “feel guilty about paying for the things we need.” In reality, however, a budget should be used as a tool for awareness. Taking the coffee example from the first lesson. Most people are not aware that a $4/day coffee habit can set you back $1460 a year. According to Yahoo! Finance, when including assumed investment returns, a 30-year habit can cost nearly $240,000. While it sounds painful, Richards was careful to warn away from shaming and evoking pain, as that adds to the negative stigmatism about budgeting. Instead, it should be looked at through the lens of nonjudgmental awareness. Over time, this tracking leads to awareness and awareness often leads to behavioral changes. Diligent tracking also helps combat the instant gratification wave plaguing our culture and instead helps keep personal financial goals front and center.

Another problem with budgeting is that some people just don’t want to know and would prefer to keep their head in the sand. After all, ignorance is bliss, right? Joking aside, this is a nationwide issue. In an op-ed for the Atlanta Business Chronicle, Robert Balentine cited these statistics:

  • According to Gallup, the average retirement age for the U.S. worker is 62, the highest since 1991, the year Gallup first started asking this question.
  • AARP reports that 57 million Americans (more than half of the 18- to 64-year-old population) have no access to a retirement savings plan.
  • Furthermore, AARP states that the median retirement account balance is $3,000 for all working-age households in the country.
  • In 2013, TransUnion reported that Georgia had the ninth-highest credit card debt per borrower in the nation.
  • Federal student loan debt topped $1 trillion in 2013, according to the Consumer Financial Protection Bureau.

Balentine summed up these startling statistics by saying, “We have spent too much, saved too little and lived beyond our means. Simply put, we are a financially illiterate nation.”

In the book, Richards gives advice and recommends online tools and apps to help readers get started on this process. While time consuming and perhaps a bit unpleasant, knowing your starting point is an important part of building the financial plan and helping investors reach their goals.

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